More Trouble in Iranian paradise

Remember the Iranian gas rationing scheme? Well, now there's this:
Iran interest rate cut sparks panic selling

Methinks, the littlest theocrat is in over his wee head. I smell panic.

Iran's financial system suffered a fresh jolt yesterday with panic selling on the stock market after the president, Mahmoud Ahmadinejad, abruptly ordered banks to cut interest rates sharply, despite surging inflation.

The order, which Mr Ahmadinejad issued by telephone during a visit to Belarus and which flew in the face of expert advice - has triggered warnings of a financial crisis and spiralling corruption amid fears of a capital flight from the country's lending institutions.

Mr Ahmadinejad's decree forced all state-owned and private banks to slash borrowing rates to 12%. Inflation is officially 15% but is generally believed to be much higher. State banks had been offering rates of 14%, while those in the private sector ranged from 17% to 28%.

The decision caused panic in the Tehran stock exchange, with private banks losing much of their share value overnight. Shareholders in one bank, Karafarin, queued on Wednesday to sell their stock when previously there had been 1.2 million applicants to buy its shares.

And about that gas rationing scheme? The one that resulted in lines at the Iranian petrol station? Timing is everything, Mahmoud....

The rate cut was imposed at the same time as Mr Ahmadinejad raised the price of petrol by 1p to 5p a litre. That caused anger among motorists, who expected a new rationing system to be introduced on Tuesday. The government has postponed rationing until next month, citing difficulties in introducing the necessary technology to filling stations.

Update: Ahmadinejad rebuked over incomprehensible rate cut.